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| Edited By: |Source: Zee Business |Updated: Feb 06, 2018, 05:10 AM IST
The Indian market may correct 20-30%, but it is attractive to stay invested in the country for the long term, said Marc Faber, editor & publisher of ‘The Gloom, Boom & Doom Report’ in an exclusive interview with Zee Business. He also pointed out that India has the potential to become the second or third-largest economy in the world. Edited excerpts:
The Budget has been a mixed bag. I don’t think the stock market in India has fallen just on the account of Budget. I think other factors are at play too.
I am against any kind of tax, be it LTCG, STCG, excise duty, or value added tax. I think one should try to keep the government as small as possible. The best way to keep the government small is not increasing taxation, because the more money you give to the government, the bigger it will grow.
Everybody says it’s a correction, but that is a premature statement. We don’t know yet. There may be a correction of 5%, 10% or even 20%. But it could also be a beginning of something more serious that may pull down the market much more.
In the US, a bull market started essentially nine years ago in March 2009. We are up close to four times since then, and in the last two years we never had a correction of more than 5%. After these conditions, it is not unlikely that the market will face some tough time. The market may decline by 40%. I’m not saying it will happen. I say it could happen.
Indian markets have now the yields removed. I had said two years ago that Indian markets will outperform US markets over the next 10 years. Two years are gone. But it doesn’t mean that US markets can’t have a significant correction. In 1987, we have had a 40% correction, followed by recession, then market continued to go up until 2000. My sense is we had a Nirvana condition for the financial assets over the last 8-9 years. Bonds, stocks and practically every sector have rallied. The dollar was firm. All these conditions will change. It will be more challenging for investors.
In the case of India, it has had a big rally, and a correction is overdue. But it’s attractive to stay in India for the long term. India has the potential to become the second or third largest economy in the world, but at the same time, the benchmark may dip by 20-30%, but there will be shares that will move up.
A year ago, my top pick was Vietnam, but now it is also due a significant correction.
Your question is not easy to answer. Markets world over are being manipulated by central banks keeping interest rates low. In India, RBI’s relatively tight monetary policy has resulted into rupee being strong and stable against the dollar over the last two years. The RBI deserves some positive marks. I believe Indian economy may not be super healthy, but compared to others, it’s a reasonably good bet to own.
I see a huge opportunity there.
